Climbing the financial ladder

    While Wal-Mart has focused on the low income market, the concern among payment processors like Visa (V, Fortune 500) and Mastercard (MA, Fortune 500) and among community banks is that Wal-Mart will keep inching up the food chain and possibly end up with that banking charter it has been eyeing for more than a decade. As Jane Thompson, Wal-Mart's president of financial services told The New York Times back in 2007, Wal-Mart's debit cards and other payment services are "foundational products," from which Wal-Mart could expand "up the credit ladder of financial services." Wal-Mart did not respond to a request for comment for this story.

    Certain aspects of the financial regulation currently being debated by lawmakers could continue to impede Wal-Mart's bank charter gambit. But on measure, Professor D. Anthony Plath, who teaches finance at the University of North Carolina at Charlotte, says Wal-Mart has never been in a better position to force the issue. Regulators have already curtailed overdraft fees and cracked down on the way credit-card companies punish customers who miss or delay payments. Lawmakers are now showing a strong interest in capping fees on debit transactions.

    Meanwhile, consumers are being hit with new fees -- and the end of free checking -- at many banks trying to shore up this ever-important source of revenue. A new well-funded competitor like Wal-Mart would make this fee shift more difficult and drive down fees across the board.

    "If there has ever been a time when you can make an argument for increased competition, now is the time," says Plath, who notes that Wal-Mart has already met all regulatory demands, has the necessary capital, has a balance sheet that is stronger than many commercial banks and serves an ignored market. He projects that Wal-Mart will obtain a banking license within the next few years, calling it "pretty much a fait accompli," and that the company will then bring to market a series of "lifeline services," such as simple savings and deposit accounts carrying very low costs, and loans to consumers shut out by their community banks.

    "Wal-Mart is going to accelerate the evolution of the banking industry," he says. "They would be a different kind of bank, but the kind of bank the industry may need right now."